Porter v. Plymouth Gold Min. Co.

• Decision Date: 11 January 1904
• Citation: 74 P. 938,29 Mont. 347
• Parties: PORTER et al. v. PLYMOUTH GOLD MIN. CO.
• Court: Montana Supreme Court

74 P. 938

29 Mont. 347

PORTER et al. v. PLYMOUTH GOLD MIN. CO.

Supreme Court of Montana

January 11, 1904

Commissioners' Opinion. Appeal from District Court, Lewis and Clarke County J. M. Clements, Judge.

Action by James Porter and others against the Plymouth Gold Mining Company. From a judgment entered on demurrer, and from an order dissolving an attachment, plaintiffs appeal. Affirmed.

S. A Balliet, for appellants.

Walsh & Newman, for respondent.

CLAYBERG C. C.

Appeal from final judgment and from an order dissolving attachment.

The material allegations of the complaint are, briefly, as follows: That on the 23d day of May, 1900, appellants and respondent entered into a contract whereby respondent agreed to sell appellants 4,00 shares of the capital stock of the respondent company at the price of $2,000; that appellants purchased the same, and paid the consideration therefor to respondent; that at the same time this purchase was made the respondent agreed in writing with the appellants that if, at the expiration of six months from the date of the sale, appellants should become dissatisfied with the stock, or with its earning power as an investment, they should be entitled to return the said stock to said respondent upon notifying respondent of their intention so to do, and that the respondent should relieve them from all liability thereon, and repay to them the said $2,000, with interest at 8 per cent. from date of payment that on or about September 13, 1900, appellants became dissatisfied with the stock and its earning power as an investment, and notified respondent of their conclusions, and of their intention to return the stock to respondent and demand the payment of the sum of $2,000 and interest. The complaint continues: "And at said date the said James Porter and George Swan did demand of said Plymouth Gold Mining Company, of Gould, Montana, the payment of the said $2,000, with interest, as aforesaid, and did offer to return the stock of said Plymouth Gold Mining Company in accordance with the terms of said agreement. Plaintiffs further state that ever since said date they have been ready and willing to receive payment of said two thousand dollars ($2,000) and interest aforesaid upon the same from the 23d day of May, 1900, and ever since said 13th day of September, 1900, have been ready and willing to deliver said stock to said company in accordance with said agreement." Respondent demurred on the ground that the complaint did not state facts sufficient to constitute a cause of action. The court below sustained this demurrer. Appellants standing on their complaint, judgment was entered in favor of defendant. Upon the filing of the complaint and issuance of summons in this case appellants caused an attachment to issue against the property of respondent. Respondent made a motion to dissolve the attachment, which motion was heard at the same time as the hearing of the demurrer. The court dissolved the attachment, and appellants also appeal from said order of dissolution.

On the day of the hearing of these appeals counsel for respondent presented a motion for their dismissal, based on the three following grounds, viz.: (1) Because the record does not disclose that the notice of appeal was served upon respondent. (2) Because the record does not contain the notice of appeal properly certified. (3) Because it does not appear from the certificate of the clerk of the court below that the record contains the judgment roll. On the hearing, permission was given appellants to correct the record so as to avoid the motion to dismiss, if the facts warranted it. Counsel for the appellants procured a new certificate of the clerk of the court below, which now appears attached to the transcript, and by which the clerk certifies that the record contains "full, true, and correct" copies of the judgment roll and notice of appeal.

There is no merit in the first ground of the motion. The respondent does not object because there was no service of this notice, but because it does not appear from the record that a notice of appeal was served upon respondent. The bill of exceptions, which is properly a part of the record, recites service upon counsel for respondent, and shows their acknowledgment of the same.

The second and third grounds of the motion, viz., that the record does not contain the notice of appeal and judgment roll properly certified, have been removed by the new certificate of the clerk of the court below, to which no objection has been made.

We advise that the motion to dismiss the appeal be overruled.

We shall therefore consider the appeal upon its merits. The first matter for consideration is the appeal from the judgment, and the first question to be decided is, does the complaint state facts sufficient to constitute a cause of action?

1. Counsel for respondent, in support of the judgment, insists that the contract sued upon is ultra vires on three grounds: (a) That a private corporation cannot purchase its own stock; (b) that by such purchase its capital stock is decreased, in violation of section 438 of the Civil Code; (c) that by such purchase a subscriber is secretly allowed to withdraw his subscription. We shall discuss these reasons seriatim.

(a) May a private corporation purchase its own stock? Generally speaking, a corporation, when acting within the scope of the purposes of its organization, has the same power to contract with reference to such purposes as an individual. True, this power must be exercised in the proper corporate manner, and by the proper corporate officers. In this case, however, no question is raised concerning the form or manner of the execution of the contract sued upon. So we must assume that it was made in the proper corporate manner, and by the proper corporate officers. In the absence of a showing to the contrary, we must also assume that the corporation held the stock in question for sale just as it holds any other asset, and possessed the power of disposition. We are therefore not concerned as to the manner in which the corporation acquired the stock, or the character of the stock itself. It is sufficient to know that it had the stock, the right to sell it, sold it, and received the purchase price upon such sale. Respondent complains that the corporation did not stop at the sale of the stock and the receipt of the purchase money, but contracted to take the stock back and return the purchase price, with interest, upon the happening of certain events. This agreement by the corporation is based upon the consideration of the purchase of and payment for the stock by appellants, by the express terms of the contract sued upon. Two objects were evidently in the minds of the contracting parties at the time this contract was entered into, which were sought to be accomplished by the contract, viz., the sale of the stock and a contract for its repurchase. The company desired to sell the stock; appellants desired to purchase the same, but were unwilling to do so without having the company bound by contract to repurchase it upon the happening of certain events. The purchase and payment of the purchase price was a consideration to the company for its promise to repurchase the stock. There was but one contract, viz., for the sale and repurchase of the stock, each object being a consideration for the other. This contract was entire and indivisible. The sale could not be sustained unless the contract of repurchase could be enforced. Therefore, if a portion of the contract is ultra vires, the whole contract must fall. The corporation cannot be heard to say that the sale was valid and the contract to repurchase was void without rescinding the sale and returning the purchase money, thus placing the other party in statu quo ante. The appellants have executed the contract of purchase on their part by the payment of the purchase price. The corporation therefore has received from them something of value, which it would not have received except for its contract of repurchase. It cannot be heard to say: "True, I have received your two thousand dollars, which I promised to return to you upon the happening of certain events, but my promise in that regard was and is beyond my power to enter into, and, although the contemplated events have occurred, I will keep your money, and will not perform my contract." Such action, if allowed, would be a reproach upon the law. It is not honest or right, and right is the basic principle of all law. The following language of Judge Parker in Steam Navigation Co. v. Weed, 17 Barb. 378, is very pertinent in this connection: "I am happy to come to the conclusion that the law will not sustain this most unconscionable defense. It ill becomes the defendants to borrow from the plaintiff one thousand dollars for a single day, to relieve their immediate necessities, and then to turn around and say, 'I will not return you this money, because you had no power, by your charter, to lend it.' Let them first restore the money, and then it will be time enough for them to discuss with the sovereign power of the state of Connecticut the extent of the plaintiff's chartered privileges. We shall lose our respect for the law when it so far loses its character for justice as to sanction the defense here attempted." But this is somewhat of a digression, and is only stated as illustrating the character of the defense sought to be interposed by the corporation. We shall now return to the question under consideration.

We believe the rule to be well settled in the United States by the overwhelming weight of authority and reason that a private corporation may purchase its own stock if the transaction is fair and in good faith; if it is free from fraud, actual or constructive; if the corporation is...